Contemporaneous Documentation Requirements

In the context of R&D tax credits, "contemporaneous documentation" means records created at or near the time the research activity was performed — not reconstructed months or years later.

The IRS strongly favors contemporaneous evidence because it's more reliable and harder to fabricate. While Treasury Regulation §1.41-4 doesn't explicitly mandate contemporaneous records, the Tax Court has consistently held that real-time documentation is significantly more credible than after-the-fact reconstructions.

R&D tax credit claims are examined more frequently than many other credits. When the IRS audits a claim, they look for evidence that:

1. Activities actually occurred as described
2. The four-part test was met at the time of the activity (not rationalized later)
3. Time allocation between qualifying and non-qualifying work is substantiated
4. Expenses tie back to specific qualifying activities

After-the-fact reconstruction — asking employees "what did you work on last year?" — produces vague, inconsistent, and ultimately weak documentation. The IRS knows this, and so do Tax Court judges.

For software development teams, the strongest contemporaneous evidence includes:

• Version control history: Git commits, branches, and pull requests — timestamped, attributed, and descriptive
• Time tracking data: Per-project time allocation captured as work happens
• Design and architecture documents: Created at project inception, showing the uncertainty that existed
• Code review records: Comments and feedback showing technical evaluation
• Sprint/project management records: Tickets, stories, and task descriptions
• AI coding session logs: Conversation timestamps and metadata (not content) showing R&D brainstorming
• Test results and benchmarks: Evidence of experimentation and evaluation

The key principle: if it was created while the work was happening, it's contemporaneous. If it was created during tax season, it's reconstruction.

Most software teams already produce excellent contemporaneous evidence — it's just scattered across GitHub, Jira, Slack, local editors, and AI tools. The documentation gap isn't about creating records; it's about:

1. Organizing existing records to map to IRS criteria
2. Classifying each activity against the four-part test
3. Calculating time allocation from activity data
4. Generating the narratives and forms the IRS expects

This is busywork that traditionally costs $10K–$30K when outsourced to an R&D tax credit firm. They interview your team, reconstruct the year from memory, and write narratives months after the fact — producing exactly the kind of after-the-fact documentation the IRS considers weakest.

quarryFi captures contemporaneous evidence automatically by connecting to your existing development tools. Every commit, coding session, and AI brainstorming session is tracked in real time, classified against the four-part test by AI, and organized into IRS-ready documentation. No year-end reconstruction. No interviews. No spreadsheets.